Globalization has increased the diversity of goods, the numbers of competitors for goods and services, the set of job opportunities, as well as the amount of available knowledge with the potential to create new research opportunities and to stimulate innovation. This comes at the cost of having to acquire and process this decentralized information to make an optimal decision. At the same time, the available time for consideration of each offer is limited. In this study, we investigate (i) how time pressure influences sequential search processes and (ii) whether people forgo material benefits through insufficient search to avoid feelings of self-blame in case the additional search was not fortunate. In a 2x2 design, we modify the available time for making the decision on the on hand, and the informational structure on the other hand. We use a sequential search task in a laboratory setting to explore how time pressure and regret contribute to the common finding that subjects fail to achieve optimal outcomes in sequential decisions.

The primary outcomes are the search length and the stopping offer (i.e. the actually taken offer and the offer after which the search is stopped). (See preanalysis plan for details).

Primary Outcomes (explanation)

Secondary Outcomes

Secondary Outcomes (end points)

See preanalysis plan for details.

Secondary Outcomes (explanation)

Experimental Design

Experimental Design

We use a sequential search task where the subjects try to find the optimal time of purchase in a price search for a fictitious product, while incurring a fixed cost for every offer they elicit. The offers are drawn from a known uniform distribution. After each offer, they decide whether to continue the search for another period or to take the best price observed so far, i.e. they can recall every previously rejected offer. Subjects can search as long as there is a possibility to achieve a positive payoff and are not aware of the (theoretically) finite nature of the search process.

We use a 2x2 between-subject design in which we vary time pressure and feedback for participants in a sequential search task. We induce time pressure by limiting the amount of time an individual can spend on each search step (i.e. buy the product vs. draw another offer). A transgression of this limit is punished by a deduction of points from the initial endowment and no new offer is shown until a decision has been made. Orthogonal to that treatment, we vary feedback (expectations). While in one treatment, the search ends after the offer has been chosen, we introduce a feedback-treatment where subjects see additional realizations of prices after the end of the search. Thus, they see offers they would have received if they had continued. The number of actually displayed (additional) offers is determined by a lottery to avoid that people perceive the search as finite.

The search task is repeated for 10 rounds. We vary the theoretically optimal cutoff value to stop the search by altering the search costs across rounds.

In addition to the repeated search task in the 2x2 between-subject design, participants perform 2 rounds of non-sequential search with pre-commitment. In those rounds, subjects prespecify a price at or below which they are willing to buy the good.

The experiment will take place at the Munich Experimental Laboratory for the Social Sciences (MELESSA).

Experimental Design Details

Randomization Method

All randomizations are done by a computer, either in real time or in the first experimental session.

Randomization Unit

Individual

Was the treatment clustered?

No

Experiment Characteristics

Sample size: planned number of clusters

192 (8 Sessions*24) Participants

Sample size: planned number of observations

192

Sample size (or number of clusters) by treatment arms

48 (2 Sessions*24 participants)

Minimum detectable effect size for main outcomes (accounting for sample design and clustering)